Wolk’s Week in Review: AT&T takes another hit, Roku predicts even more cord cutting

TV[R]EV Week In Review
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Well-known industry analyst Alan Wolk is publishing his popular Week In Review columns first on FierceVideo every Friday. This means that FierceVideo readers are the first to get all Wolk's insights as they navigate the fast-moving television business.

Wolk's Week In Review

1. AT&T takes another hit

AT&T lost close to one million video subscribers last quarter—886,000 on DirecTV and U-verse and 68,000 on virtual MVPD AT&T TV Now (FKA DirecTV Now). That means AT&T’s total losses for the year are approaching 2 million subscribers, versus 1.57 million in the first two quarters of 2019.

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Why it matters

In much the same way the Ottoman Empire was known as the “sick man of Europe,” AT&T is the “sick person” of the MVPD universe. They’ve lost far more subscribers than any of their competitors and it doesn’t take a rocket scientist to understand why.

They focused customer acquisition on deep price discounts and when those discounts expired, the customers took off.

And at a time when services like Hulu + Live TV and YouTube TV are winning new customers with a simplified offering and fresh-looking interfaces, AT&T is doing the phone company thing, with multiple tiers and multiple offerings, changing names and throwing in new devices like an Android set-top box that’s just not the Roku or Fire TV customers really wanted.

This has been an issue with AT&T for a while now: they figure out what will make sense from a business POV but neglect to ever wonder whether consumers will actually want the thing that they’re offering.

This was a not-completely-awful approach in the mobile industry where consumer choice is severely limited, but in TV, in 2020, it’s just way too easy for consumers to find someone else.

With TV, AT&T seems to have had a plan to somehow meld the data it gets from mobile subscribers with the data it gets from pay TV subscribers and use that to sell ads via Xandr, with free HBO Max as a lure to get viewers to sign up for AT&T TV.

It’s a plan that makes sense on paper, but not in practice.

Take HBO Max.

The service is now about two months old, and it currently has approximately 3 million retail subscribers (people who signed up on their own) plus an additional 4.1 million HBO subscribers who actually activated their HBO Max accounts.

That last number is sort of mind blowing, given that there are around 40 million HBO subscribers in total.

So, only 10% of them thought it was worthwhile to upgrade to Max even though the price remained the same.

Of the 3 million “retail subscribers”, I am curious how many of them are former Now subscribers and where they are watching Max, given that it is not available via Roku or Amazon.

But back to that 90%.

Max has always had a very tough value prop. Basically, they needed to find people who did not think HBO was worth spending $15/month on, and convince them that the addition of some “Friends” reruns and Harry Potter movies suddenly makes that $15/month investment worthwhile.

At some point Max will have more originals and more reruns, but the bulk of the service (and its name) will still be HBO, and if you didn’t think HBO was worth your subscription dollars previously, it’s going to be a very tough sell to get you onboard, especially given the presence of six other giant SVOD services, none of whom charges anywhere close to $15/month.

So, there’s all that, and the fact that over 40 million Americans are unemployed and looking to cut expenses.

What you need to do about it

If you’re AT&T, start thinking about what consumers want: an easy to use interface, a simplified product offering and competitive pricing. You probably also need to figure out how to make all those DirecTV subs you want to switch to broadband AT&T TV subs understand why that’s a good thing and the answer to that is going to be giving them the features and pricing they want while making it really easy for them to switch over.

As for HBO Max, you’re in a tough place--without the bulk of your new originals, it’s going to be really really hard to get new viewers on board, especially given that many of your current viewers might bail, having already watched everything they want to watch and seeing more effective uses for that $15 monthly outlay.

If you’re everyone else—watch, take notes and learn. This is What Not To Do 101, and you want to avoid those mistakes at all costs.

2. Roku predicts even more cord cutting

A new study from Roku predicts that 45% of all “cord shavers” will soon turn into “cord cutters.”

Which is a bit like an umbrella manufacturer predicting a very wet summer, but they may have a point.

Why it matters

While “cord shavers” seems like a term Norelco’s marketing team would make frequent use of, it actually refers to viewers who have downgraded their pay TV service. It covers a wide range of possibilities from dropping the Super Platinum Plus package for something more basic to switching to a vMVPD.

And the big unknown here is how much of the recent cutting and shaving is related to sports.

As in, did many of those households drop pay TV or cut back on their subscriptions because there were no sports and, as analyst Laura Martin noted, "A majority of sports fans we surveyed don't consider films or television series as substitutes to pro sports.” Or did they just find themselves watching most of their TV via FASTs and Flixes and decided that $50-$150/month for pay TV each month was way too much.

Throw those 40 million unemployed Americans into the mix too, as “I can’t afford it” is a very good reason to give up pay TV, sports or no sports.

That said, if there’s one thing the industry needs to be keeping an eye on over the next few months, it is how the return of live sports impacts pay TV subscriptions.

There are several jokers in that deck though.

First is the Great Content Draught, meaning that at some point soon, viewers will have watched all the new series they wanted to watch, meaning they might drop a bunch of Flixes in favor of sports-on-cable.

Or not: the reduced fan-free seasons may feel too weird to fans and too much of a reminder of where we are to qualify as escapism.

Point being, I think it’s impossible to make any prediction beyond “we’ll find out soon enough.” Especially given that the fall—with potential new COVID waves, schools opening and closing and of course, the election—is going to be anything but predictable.

So, as we have been doing since March, we’ll just have to take this one day by day and see how it plays out.

What you need to do about it

If you’re an MVPD or vMVPD, start your marketing to sports fans early and go hard as there’s a very good chance sports are soon going to be the only thing new on TV as well as being the one thing the entire country can view as a shared activity.

If you’re a sports team or league, make sure your fans know when and where they can watch the games.

If you’re everyone else, just wash your hands thoroughly, get out the popcorn and see what happens next.

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